Month: January, 2012

With the second anniversary approaching of the Supreme Court’s decision in the Citizens United case – which opened the floodgates to corporate spending on elections – U.S. Public Interest Research Group (U.S. PIRG) and Citizens for Tax Justice reveal 30 corporations that spent more to lobby Congress than they did in taxes.

The report, Representation without Taxation: Fortune 500 Companies that Spend Big on Lobbying and Avoid Taxes, takes a close look at one area where corporate power and influence is on full display: corporate tax policy. By exploiting loopholes and special provisions in the tax code, 280 consistently profitable Fortune 500 companies paid about half the statutory corporate tax rate while spending $2 billion to lobby Congress on tax policy and other issues. The report also looks at the “Dirty Thirty” particularly aggressive tax avoiders that spent more on federal lobbying than income taxes between 2008 and 2010. Twenty-nine of these corporations actually received a net tax rebate during the three year period of the study.

The report takes a deeper look at one of the most egregious ways corporations skirt taxes – by shifting profits legitimately earned in America to offshore tax havens, where they are subject to little, if any taxes. At least 22 of the thirty companies studied had subsidiaries in tax haven countries.

From 2001 to 2010, US pension plans on average made 4.5 per cent a year, after fees, from their investments in private equity. In that period, the pension funds paid an average 4 per cent of invested capital each year in management fees. On top of those, private equity often collects a variety of other fees and a fifth of investment profits.

“Assuming a normal 20 per cent performance fee, this would amount to about 70 per cent of gross investment performance being paid in fees over the past 10 years,” said Professor Martijn Cremers of Yale.

Private equity describes its fees as “two and twenty”, a 2 per cent management fee and 20 per cent share of profits. However, the management fee is usually calculated as a proportion of total capital committed by the investor, which takes time to invest.

So in the early years, the management fee can be a much higher proportion of actual cash invested. For instance, if a $1bn fund invests $100m in its first year, the $20m management fee would be 2 per cent of committed capital, but 20 per cent of invested capital for that year.

I will lay even money that Balsillie and Lazaridis teamed up with RIM’s media relations department to put out that video, knowing full well what their new puppet was going to say. It would not surprise me if they were standing behind the camera, nodding along as Heins hit the bullet points.

Ever seen The Hudsucker Proxy? If you have not, go stream it on Netflix. The basic premise is that a clueless kid from the mailroom gets promoted to be the president of a large company so the board can ruin the stock and buy it all up themselves. Tim Robbins plays Norville Barnes, the “proxy,” a clueless guy out of business school in backwater Muncie, Indiana. Barnes is the patsy to the board, the guy taking the fall.

While Heins is not some foolish backwater kid out of the mailroom (he is an accomplished engineer who has been with RIM for four years and was the COO before his promotion), but the same principle exists. Balsillie and Lazaridis are still likely to be pulling the strings. There are distinct differences like the fact that Balsillie and Lazaridis already own most of RIM’s stock and the stock is lower than ever.

Investigate Chris Dodd and the MPAA for bribery after he publicly admited to bribing politicans to pass legislation.

Recently on FOX News former Senator Chris Dodd said (as quoted on news site TechDirt), “Those who count on quote ‘Hollywood’ for support need to understand that this industry is watching very carefully who’s going to stand up for them when their job is at stake. Don’t ask me to write a check for you when you think your job is at risk and then don’t pay any attention to me when my job is at stake,” This is an open admission of bribery and a threat designed to provoke a specific policy goal. This is a brazen flouting of the “above the law” status people of Dodd’s position and wealth enjoy.

We demand justice. Investigate this blatant bribery and indict every person, especially government officials and lawmakers, who is involved.

As thousands of websites, including the English version of Wikipedia, prepare to “go dark” Wednesday in protest against internetcensorship, a new explanation is emerging for the would-be censors’ acts: they simply don’t understand how the internet works. The evidence suggests otherwise.

Search on the these terms – Sopa, of course, stands for the Stop Online Piracy Act, which may or may not be stalled at the moment.

I beg to differ. What we’re seeing does not derive from any misunderstanding. Rather, I’m convinced, this concerted push to censor the internet, through measures that would fundamentally break it, stems from a very clear understanding of what’s at stake. Indeed, legislation like Sopa, or its US Senate companion, the Protect IP Act (Pipa) – and a host of activities around the world – share a common goal. These “fixes” are designed to wrest control of these tools from the masses and recentralize what has promised to be the most open means of communication and collaboration ever invented.

A lot of our political debate boils down to questions about equality of outcomes versus equality of opportunity. But it turns out that they’re pretty closely related. Take a look at the chart below, which is from a terrific recent speech (with charts!) by Alan Krueger:

The horizontal axis shows the Gini coefficient, which is a summary of the degree of income inequality for each country. I think of this as a measure of inequality of outcomes. The United States sits out there on the right, which says that we have high inequality, which I bet that doesn’t surprise you.

The vertical axis shows a measure of intergenerational mobility, which summarizes the relationship between your income and your parents. A score of zero means that we have equality of opportunity — the kids of rich people earn as much as the kids of the poor. A high number means that the rich parents have rich kids and poor parents have poor kids. The U.S. has a score of 0.4 which means that, on average, you pass on 40% of your economic advantage to your kids: if I earn $100,000 more than you, then on average, my kids will earn $40,000 more than your kids. So I think of this as a measure of inequality of opportunity. You’ll notice that the U.S. also scores high on this measure. Americans are often surprised to learn that in the land of opportunity, your life outcomes are largely determined by your parents.

Elizabeth Warren, who is now running for the Senate seat that Romney ran for in 1994 and didn’t get, probably rebuts this myth of class warfare best by reframing the discussion in terms of a “social contract” between the rich and the rest of society. At one of her campaign events, she explained:

“There is nobody in this country who got rich on his own. Nobody. You built a factory out there, good for you. But, I want to be clear: you moved your goods to market on the roads the rest of us paid for. You hired workers the rest of us paid to educate. You were safe in your factory because of police forces and fire forces that the rest of us paid for. You didn’t have to worry that marauding bands would come and seize everything at your factory and hire someone to protect against this because of the work the rest of us did. Now look, you built a factory and it turned into something terrific or a great idea. God bless. Keep a big hunk of it. But part of the underlying social contract is you take a hunk of that and pay forward for the next kid who comes along.”

That is the corporate Contract With America: societal symbiosis. We create a society in which smart, hard-working people can be safe and prosper, and they in turn reinvest a fair share of that prosperity back into society for posterity.

We know this from many different sources of evidence. Psychologists have conducted studies on eyewitness testimony, for example, showing how easy it is to change someone’s memories by asking misleading questions. If the experimental conditions are set up correctly, it turns out to be rather simple to give people memories for events that never actually happened. These recollections can often be very vivid, as in the case of a study by Kim Wade at the University of Warwick. She colluded with the parents of her student participants to get photos from the undergraduates’ childhoods, and to ascertain whether certain events, such as a ride in a hot-air balloon, had ever happened. She then doctored some of the images to show the participant’s childhood face in one of these never-experienced contexts, such as the basket of a hot-air balloon in flight. Two weeks after they were shown the pictures, about half of the participants “remembered” the childhood balloon ride, producing some strikingly vivid descriptions, and many showed surprise when they heard that the event had never occurred. In the realms of memory, the fact that it is vivid doesn’t guarantee that it really happened.

SOME teamwork is fine and offers a fun, stimulating, useful way to exchange ideas, manage information and build trust.

But it’s one thing to associate with a group in which each member works autonomously on his piece of the puzzle; it’s another to be corralled into endless meetings or conference calls conducted in offices that afford no respite from the noise and gaze of co-workers. Studies show that open-plan offices make workers hostile, insecure and distracted. They’re also more likely to suffer from high blood pressure, stress, the flu and exhaustion. And people whose work is interrupted make 50 percent more mistakes and take twice as long to finish it.

Apologists for rising inequality often argue that since most Americans’ income has risen despite rising inequality, there’s no reason to complain about inequality other than envy. So it’s worth remembering that we used to expect economic growth to deliver large increases in real income, not just a bit of a rise that’s accomplished in large part through longer working hours; and that a major reason so many have seen such small gains is that a large part of growth has been siphoned off to the very high end.

Lane Kenworthy had a nice chart illustrating both points, comparing median family income with real GDP per family (for those worried about the fine points, it was nominal GDP divided by the CPI, avoiding some technical issues):